Socialist economies have long been rightly notorious for empty shelves. As the saying goes, in Communism, people wait for bread; in capitalism, bread waits for people. The more the government controls the production and sale of consumer goods, and the more it interferes with business investment, the emptier the shelves get. With shortages of toilet paper and other essentials striking the U.S. economy in the opening weeks of the coronavirus outbreak, some critics of free-market economies are striking back: “See,” they say, “now capitalism has empty shelves!”
“Capitalism during a pandemic is the same as socialism in normal times” is not the killer argument for socialism that you may think it is. It’s also revealing of the true socialist mindset. “Democratic socialism,” we’re told, is just free health care and education and better wages. But a better system for stocking the shelves, even in theory, would entail something much more like a command economy of the old Soviet stripe.
Of course, the coronavirus pandemic has strained private-sector supply chains, and that’s why we have seen empty shelves in some places and for some products. The wonder is that there haven’t been more of them. Customers started hoarding just at the time when manufacturers and shippers were shutting down operations. And it’s not just hoarding, but rapid changes in customer behavior. The toilet-paper market, for example, is usually divided between residential and commercial production and distribution. Lots of large, industrial-sized rolls are usually sold to workplaces, restaurants, hotels, schools, rest stops, and other public-bathroom facilities. When all the people disappear from those places, they don’t stop using toilets. The paper needs to be packaged, shipped, and sold differently to meet increased residential demand. Something similar is true of all sorts of products: coffee, bacon, napkins, hand soap, beer, newspapers, magazines, even pizza crust. A $21 trillion economy is bound to face some disruptions when it stops on a dime. Even Amazon, the 800-pound gorilla of American retail in 2020, announced in March that it would temporarily deprioritize the restocking of inessential items in its warehouses to ensure that the things most needed and in demand could be shipped quickly to customers.
Moreover, empty shelves are not even a good criticism of free-market capitalism, either in general or in the specific case of the response to COVID-19. Free markets are, in theory, at a disadvantage in emergencies, because a single, central authority can decide more quickly and uniformly what to allocate, how, and where. But even so, deciding what to send where is neither the beginning nor the end of the supply chain.
Free markets run on two things: information and incentives. Prices transmit both. Information travels in a loop: The start of a supply chain, in a free-market system, is fed by the end. Knowing what people want to buy tells you what to sell them. Before a central authority can decide what people need, it must have that information, or it will just ship large quantities of whatever is easiest to produce in bulk. There is still no substitute for the collective decisions of consumers if you need to know what sells. Today’s empty shelf is tomorrow’s supply priority, because that’s where there is money to be made. It’s why Amazon is stocking toilet paper, hand soap, and children’s books.
Who is well situated to manufacture what is needed? Ingenuity in expanding supply to meet demand can be local when there is a buck to be made. Manufacturers are often better situated than government bureaucrats to know how easily they can enter a new line of business. An undersecretary in Washington, D.C., might not have imagined that two companies as different as MyPillow and Brooks Brothers could become suppliers of particle masks and hospital gowns, but they came forward because the people who run them understand their own capabilities, know how to meet a demand, and grasp the public-relations value of stepping up in a crisis.
The incentives of private companies to turn a short-term profit and build long-term customer goodwill often make them more effective in difficult situations. Waffle House is famous for its ability to get its restaurants open in natural disasters faster than FEMA can get set up on the ground. If you’ve watched much television the past month — and who hasn’t? — you may have noted how quickly ad campaigns refocused on selling things people want at home, from online classes to beefed-up bandwidth.
It is hard to say that government — federal or state, American or foreign — performed better than business in reacting to the unique supply problems of the pandemic. A private company in Germany developed a coronavirus testing kit on its own and, by working round the clock seven days a week, shipped over a million tests by the end of February. Meanwhile, in the U.S., the CDC bungled the production of testing kits while it and the FDA kept private industry and state government sidelined with red tape. New York City planned as far back as 2006 to build an emergency stockpile of ventilators but bought only a fraction of the number intended, and Mayor Bill de Blasio auctioned them off early in his term to save maintenance costs. The federal stockpile of ventilators was poorly maintained, leaving many devices inoperable. In each case, the government had a central plan on paper to do the right thing but lacked the incentives to deliver. If you managed a Waffle House this way, you’d get fired.
Government will, and should, always get bigger in a time of national peril. But even in the worst of times, your best bet to find what you want on the shelves is to get it from someone who can make a buck selling it.
This article appears as “Want Toilet Paper?” in the May 4, 2020, print edition of National Review.
Something to Consider
If you enjoyed this article, we have a proposition for you: Join NRPLUS. Members get all of our content (including the magazine), no paywalls or content meters, an advertising-minimal experience, and unique access to our writers and editors (conference calls, social-media groups, etc.). And importantly, NRPLUS members help keep NR going. Consider it?
If you enjoyed this article, and were stimulated by its contents, we have a proposition for you: Join NRPLUS.